Smart Borrowing – How to Prosper Financially

What is a commodities super-cycle?

January 6, 2023 by Ben Leave a Comment

A commodities supercycle or boom is a period of sustained and continued expansion due to increased demand for goods and products. Such supercycles are driven by economic growth and demand for energy sources, manufactured materials, and raw materials.

In-Demand Commodities during a Supercycle

Commodities that are in high demand include natural gas, coal, crude oil, aluminum, copper, and iron ore.

Natural Gas and Oil

Natural gas is used to manufacture iron, steel, bricks, glass, and paper. It is also used by utilities companies for electricity generation and by the commercial sector for metals preheating, incineration, and waste treatment. Crude oil is refined to produce diesel, jet fuel, and gasoline which are used to power equipment and for transportation.

Global political tensions, conflicts, and sanctions as in the case of the Russia/Ukraine conflict push up natural gas and oil prices. Gas prices have already doubled while oil prices have recently reached $139 a barrel, the highest we have seen in about 14 years.

Russia is the world’s biggest exporter of natural gas and the second biggest crude oil exporter. If one country relies on Russia for gas and receives less, it has to find an alternative source, thus impacting supply elsewhere.

Industrial Metals

Coal is used by steelmakers to produce steel and by utilities companies to generate electricity. Aluminum is a key component of airplane parts, electrical transmission lines, window frames, and other goods. Copper is used as a construction material for plumbing and roofing and for the manufacturing of industrial machinery and electrical equipment. Iron ore has many applications such as manufacturing catalysts, auto parts, magnets, and steels and construction of bridges and commercial buildings.

Demand for industrial metals has been high during all commodities supercycles. In 2008, for example, China’s demand for industrial metals, including aluminum, coal, and steel, resulted in record-high prices in 2008 and kept prices on the rise until 2014.

When it comes to precious metals, we have seen an increasing demand for silver and gold. Commodity supercycles have no effect on the industrial use of specialty metals but they become more attractive as an investment tool and a hedge against inflationary pressures.

Why Commodity Supercycles Occur

Commodity supercycles occur in response to profound changes in how societies and economies function. Such changes increase demand for a wide range of commodities. History has witnessed 4 supercycles over the past 120 years. The first such cycle occurred during the US mass industrialization in the 1890s and continued until 1918, driven by an increased demand for weapons and armaments during World War 1. The most recent commodities supercycle occurred in 2001, with China joining the World Trade Organization. China’s large-scale urbanization and economic reforms increased demand for commodities. The fourth supercycle ended with the onset of the global financial crisis in 2008.

New Supercycle on the Horizon

There are some signs that we are witnessing a fifth supercycle driven by the energy transition and global health crisis. Metal and oil prices have skyrocketed recently, and producers find it increasingly difficult to meet demand. In fact, the China – United States trade war and Covid-19 pandemic forced many producers to reduce capacity while there has been little investment in new coal, gas, and oil supply projects.

In addition, the current commodity supercycle is marked by a growth in demand for agricultural products and specialty metals such as silver and gold. Agricultural commodities, in particular, are expected to increase in value due to demand for biofuels and demand from China. As air quality, water, and land are at a premium, demand for agricultural products will remain high in China for the next 5 – 10 years.

The conflict in Ukraine is also pushing up agricultural commodities prices, with over 17 percent increase in the price of corn, barley, oats, and other grains. Vegetable oils have seen the biggest price hikes (23.2 percent) as Ukraine is the biggest sunflower oil exporter while Russia is the world’s second biggest. Skyrocketing prices for grains, corn, vegetable oils, and wheat are already threatening food shortages around the globe. Shortages are mainly caused due to disruptions in export flows, with large quantities of produce still sitting in Ukraine because of the blockage of major ports. There is also a risk that some crops would be damaged or destroyed, including spring crops such as soybeans, barley, and corn.

Demand for commodities is expected to increase further as economies around the world are gradually reopening after a significant rise in vaccination rates.

How Is the New Supercycle Different?

When a new supercycle is to occur, we are likely to see some differences. One is the green fiscal stimulus that couples up environmental objectives with crisis spending and efforts to restart the global economy. This transition to a system that is more efficient and cleaner is expected to give rise to new emerging sectors and new jobs and opportunities. The American Jobs Plan, for example, includes a proposed $174 billion investment to accelerate the domestic electric vehicle industry, coupled with commitments to green infrastructure and clean energy. The European Union also agreed a massive green stimulus, with funds to be invested in alternative fuel projects that support climate action. China has announced plans to reduce emissions and achieve carbon neutrality by 2060. In Canada, Covid-19-related spending was the main focus of the previous two budgets but in 2022, the federal government announced a comprehensive package of measures aimed at reducing greenhouse gas emissions. Under the 2030 Emissions Reduction Plan, Canada is taking action to promote clean industrial growth, create sustainable jobs, and achieve zero-net emissions by 2050.

This focus on clean energy means that if a new commodity supercycle is to occur, it will be driven by an increased demand for copper. Copper prices already increased by 17 percent in 2021 amidst sustainable and green initiatives. Copper has a wide range of applications such as high conductivity wires, electrical cables and wiring, and power transmission lines. It is used in green and traditional infrastructure and is a major component in electric vehicles, including charging stations, wiring, inverters, batteries, and electric motors. At the same time, shortages are expected to occur due to pandemic-related disruptions of mining operations in Peru and Chile and an increased demand in China. While demand from China is expected to gradually moderate, it will not do so in many parts of the world.

It is clear that the various green stimulus packages and climate change plans will not drive demand for fossil fuels down, at least not in the short run. After all, if we want to build green infrastructure, we will need traditional fuels. Long-term implications, however, are far from clear.

Best Canadian Bank Accounts

October 18, 2022 by James Todorov 1 Comment

The two most popular account types are chequing and savings accounts. They are each useful for different things, with varied strengths and weaknesses catering to all kinds of people. Chequing accounts are the most common and are well suited to everyday routine purchases. Savings accounts are created to serve longer-term goals. They impose limits on withdrawals per month, allowing money to build in the account. Most banks also offer youth accounts, which usually present lower fees and high interest rates. There’s also the option of merging your finances with a separate individual, known as a joint account. Basically, every one of the big old established banks will offer these accounts and more, though other fresher options exist. Financial Tech companies are constantly growing in number, size and influence. They can often cut the usual fees because of their fully online presence, making them a great option for those looking to save money. There are many differences between chequing and savings accounts and it may seem overwhelming. This article will help you better understand the landscape of bank accounts and what the best option is for you.

Chequing Accounts

RBC offer four levels of chequing account. At $4/month, the RBC Day to Day Banking option is the most inexpensive in the range. Interac and e-Transfers are free. If you don’t make many transactions, this account could work very nicely. The levels above offer greater rebates and other small advantages here and there. At the top level for $30/month transactions worldwide are free and unlimited, whereas the others are Canada wide only.

TD chequing accounts have the same 4 level mold as RBC. Their Minimum Chequing Account comes in at $3.95/month with up to 12 free debit transactions per month, just like RBC’s Day to Day Account. One difference is that e-transfers cost $0.5-1.00 each with TD. This is not the case with their higher level accounts, which also offer boosted amounts of free monthly transactions and free annual rebates at the top two levels.

BMO chequing accounts offer a similar style of levels but have an added fifth option. Once again, the most basic account costs $4/month and comes with 12 free transactions. The accounts scale up at a similar pace to their competitors. The Plus, Performance and Premium BMO bank accounts offer $0 in monthly fees if you maintain a certain balance in the account.

This also goes for Scotiabank’s three higher level chequing accounts. Scotia’s basic account is $3.95/month with features that match all the former.

Savings Accounts

If you’re looking to save money for the future, here are some Canadian savings accounts which can help you reach your financial goals. Savings accounts offer varying interest rates which build your money but most established big banks will likely give you a lower interest rate than some newer fintech competitors. Nevertheless, they are still widespread and grow your money. RBC offers a few types savings accounts, all without monthly fees. Their High Interest account has an interest rate of 0.8%. TD’s version of the high interest savings account offers only 0.05% interest, assuming you have at least $5,000 in the account. Scotiabank’s Momentum Plus Savings Account allows you to earn higher interest the longer you save. The base rate is 0.85%, and only grows the longer you wait. This Scotiabank Savings Account is really not made for spending but within one year you can really increase your interest rate. All these banks offer generally low interest rates. Neo Financial is an entirely digital company that offers you 1.80% interest with the Neo Money Account. This interest rate is exponentially higher than average. There are no monthly fees, and it doesn’t matter how much you have in the account. Any amount generates the same interest rate. To top this, the account simultaneously acts as a chequing account. Transactions are free and unlimited. All this and more is why this is one of the best no fee bank accounts Canada has to offer.

Specialized Accounts

Though the most common, normal savings and chequing accounts are not always perfectly suited to everyone’s needs. If you find yourself in a relationship or simply in a situation where it is pertinent to merge your money with somebody, a joint account could work perfectly. They are widely offered, from RBC joint accounts to Scotiabank. If you are a parent and want to teach your child about managing their money early on, check out CIBC’s youth account. It offers 0.05% interest, unlimited transactions and no monthly fee. RBC’s student account is also a good option with similar features for those ages 13 or higher.

No Fees with FinTech

If you’re a student or senior you will likely fall under the category of discounted or no fee accounts. However, the majority of people have to pay monthly and annual fees to their banks. If you are looking to save money, point your attention to digital financial institutions. Companies like Neo and EQ Bank are able to cut many costs for their clients. This is because they spend far less than other banks as they have a completely digital presence. Older traditional banks operate mostly through branches and they must pay property fees and wages to tellers and branch employees. They pay a lot of this through fees to their clients. Fintechs avoid all these fees and also allow for a very comfortable and convenient banking experience through their mobile apps and websites.

Best Canadian Chequing and Savings Accounts

When deciding on what kind of account might be best for you, you need to consider all factors. Coming to a conclusion may not be simple, but even when you do you will likely have to compromise depending on the account type you choose. This is not the case with Neo’s Money Account. It is one the best no fee bank accounts in Canada. There is no need to make a compromise with this account because it combines the best of chequing and savings accounts. The comparatively enormous interest rate is fantastic for your money, and everything is manageable easily through their mobile Neo app.

Canadian Bank Routing, Transit, Branch, Account and Institution Numbers Explained

September 15, 2022 by James Todorov 1 Comment

Although managing your finances may be an everyday part of life, there is a lot of important information that is commonly unknown. Information about your account and bank can be required in multiple situations. If you want to setup a direct deposit you’ll be asked to present your account number and your routing number. These numbers will also be required if you want to move money into a Canadian account. These two examples are common banking actions, yet understanding of what terms like routing and account numbers are is limited. We are here to help you understand the meaning of transit, branch, account, routing, and institution numbers so that you can bank more confidently in the future.

Routing Numbers

Routing numbers are made up of two parts. They are usually 8 digits long and are made up of an institution number and a transit number. Their format on paper is XXXXX-YYY. The X’s correspond to the transit number and the Y’s are the institution number. If the transaction is online then the format flips and a leading zero is tagged to the front, resulting in a 0YYYXXXXX format.

Institution Numbers

To put it simply, institution numbers are unique three digit codes which correlate to a given financial institution. They are used to identify various banks and are the most general of the numbers we’ll be covering. The institution number also makes up one part of the routing number. The institution numbers of some of the biggest Canadian banks are listed below.

Bank	Institution Number
BMO	001
Scotiabank	002
RBC	003
TD	004
National Bank of Canada	006
CIBC	010

Branch or Transit Numbers

It is easy to get confused with this number as some call it a transit number and others a branch number. All you need to know is that they mean the same thing. It is a five digit code which says which branch of the bank the account in question was formed at. Every branch has its own unique transit number and the branch you create your account at is also known as your home branch. The transit number makes up the other part of the routing number.

Account Numbers

An account number is usually a seven digit code which follows the routing number on cheques. BMO, RBC, TD, CIBC, and the National Bank of Canada all have seven digit account numbers. Scotiabank is one case where it is possible to have a number that is either 7 or 12 digits long. Unlike institution numbers and transit numbers, your account number is completely unique to you.

Where to Find Your Numbers

If you are in need of any of your personal numbers, there a few ways to find them. One way is to login to your online banking. From your bank’s website or app you can check your personal details and find out exactly what you need. You can also see your details such as routing number and account number on any paper statements that your bank sends you through the mail. Lastly, if you have a chequebook at home, look at any cheque and you’ll find all the numbers printed at the bottom of it. One thing to note is that on a physical cheque there will also be another number on the bottom. This one simply marks the individual number of the cheque you are handling within the chequebook.

Best High Interest Savings Accounts in Canada

August 4, 2022 by James Todorov 2 Comments

All of us have long term financial goals. Everybody has something a little more expensive they’ve had their eye on and want to save up for. Sometimes you may just want to grow money that you have but aren’t spending. A high interest savings account is one of the best ways to do this. High interest savings accounts are risk and hands free, all while earning you interest on your money to help you do whatever you can dream.

With the current worldwide economic situation improving as we near the end of the global pandemic, interest rates are rising at many Canadian banks. This means that it is a great time to put your money somewhere where it can appreciate. There are things you have to watch out for though. Many banks’ marketing strategies involve a tactic which temporarily boosts the interest rate of a given HISA (High Interest Savings Account) to make it more desirable. After the first few months the rate decreases to the usual and comparatively miniscule interest percentage. As long as you know that the normal interest rate is still good, you won’t be unpleasantly surprised.

You may be asking yourself why people have regular savings accounts if the high interest counterparts earn more interest. High interest accounts oftentimes have some drawbacks or conditions when compared to normal savings accounts. These can include a limited amount of monthly withdrawals or a minimum account balance.

TD High Interest Savings Accounts

TD has two accounts that fall under high interest. The first offers an interest rate of 0.05% as long as your balance is over $5000. The second account is called the ePremium savings account. It offers 0. 5% but your balance has to be double at $10,000. If you have the ability to maintain such a balance, this account could work for you. The account offers unlimited free online transfers to other TD accounts. Although transaction fees are high with the regular high savings account, if you plan on keeping the money there and not spending it too much, it can work just fine.

RBC High Interest eSavings Account

RBC’s eSavings account offers an interest rate of 0.5%. This is the same as TD’s ePremium account. Both accounts have no monthly fees but RBC has the big advantage of not requiring a minimum account balance. Transfers to other RBC accounts are free and you even get one ATM withdrawal per month, free of charge. If you sign up by August 31 2022 you can get a promotional interest rate of 3.0% for the first three months.

BMO High Interest Savings Accounts

BMO has a fairly simple account called the BMO smart saver account which has similar features to TD’s simpler account. It has the same interest rate of 0.05% and no monthly fees but it beats out TD as it does not present a minimum balance. There is a higher interest option available: The BMO savings builder account has an interesting mechanic. Although it offers a going interest rate of 0.1%, you can earn the bonus rate of 0.6% as long as you invest $200 into the account every month. There is no minimum account balance and as with most accounts mentioned in this article you have one free outgoing transfer per month, every other one costing you $5.

Scotiabank Momentum Plus Savings Account

The Scotiabank savings account is a special type of account. It is a tiered-interest account, which simply means that depending on how long you hold money in the account for you will earn more interest. The tiers start with a 0.35% interest rate. If you leave the money in the account untouched for 90 days then the rate jumps to 0.85%. For 180 days you get 0.9%, for 270 days you get 0.95%. If you wait a full 360 days, you get an even 1%. There is one important thing to note. This offer of increasing interest rates is up to one year and after that period you will only earn a base 0.85%. The account has no monthly fees but it also has no free transactions. Every single one will cost you $5. However, if you are signing up for this account you are likely looking to let the money build unspent so that you can accumulate interest rate during the one year period.

CIBC eAdvantage Savings Account

The CIBC savings account has an interest rate of 0.35% and no minimum balance. It also has a similar gimmick to BMO’s savings builder account. If you deposit $200 every month you get an additional 0.25% of interest. Once again there are no monthly fees. Like with Scotiabank every transaction you make will cost you $5 dollars.

Tangerine High Interest Savings Account

Tangerine’s savings account has a fairly competitive interest rate of 0.1%. This comes at the cost of no monthly fees too. Until October 13^th 2022 new clients can get a promotional interest rate of 3.25% for the first five months. As usual moving money to and from other Tangerine accounts is free of charge. All this makes the Tangerine savings account a good option. However, although they are an online bank, they do not offer interest rates that are as high as their other exclusively digital competitors.

Neo Money Account

Almost all the banks listed above are established big banks in Canada. They offer fairly similar and low interest rates on their Canadian high interest savings accounts. If you are looking for something with higher interest rates, digital finance is your answer. Companies like Neo offer comparatively astronomical interest rates on their savings accounts. The Neo money account has an interest rate of 1.8%. It also has no minimum balance and entirely free transactions. This account is flexible and has attributes of both a chequing and a savings account. If you are in Canada and looking for a no fee account with a great interest rate Neo might be worth your time.

The Verdict

There is no one account that is superior to all the others. Every single one has its own advantages and drawbacks. Tiered accounts like Scotiabank’s momentum plus are fantastic for the first year where interest rate grows and even after that, their rate of 0.85% is quite competitive. If the only thing you are looking for a high interest, then Neo could be your answer. There are other factors too of course, such as transaction costs. Most typical high interest savings accounts will allow for one free transaction per month, charging after that. Once again, Neo presents an advantage in this category, as they have completely free transactions. However, you may already be a client of another bank. This may make it more convenient to setup a high interest savings account with the same bank to allow for free transactions to and from your accounts.

Pros and Cons of Debit Cards

July 14, 2022 by James Todorov 3 Comments

Understanding more about debit cards can help you make better decisions to do with your finances. Debit cards have many upsides to them which make them useful in a wide variety of situations. Not everybody knows the right way to use them though. They are great for anybody and are accepted near everywhere making them convenient. However, according to worldwide data debit and credit cards are used at a near equivalent rate. This shows that credit cards must have some advantages over debit cards. In this article we will breakdown all the benefits and drawbacks of debit cards to help you be informed and decide when to use them.

The pros of a debit card

Debit cards are very convenient. Being declined very rarely, they are great worldwide and can be used to withdraw money from widely available ATMs without a service fee. Withdrawing cash with debit cards means that the money is immediately removed from your account. Because of this fact, you do not end up garnering a balance that you have to pay off. This balance comes with owning a credit card, and you could end up having to pay interest upon it, a problem that debit cards come without. Debit cards are interest-free.

Another advantage of debit cards over their credit counterparts is that in most cases they do not carry any annual fees. This factor is key for it makes them easier to afford. You won’t have to pay or use your debit card to keep it activated. You can make as few or as many purchases without worrying the card’s functionality. Accounts associated with debit cards like chequing accounts do sometimes charge monthly and/or annual fees.

With credit cards, it is quite easy to overspend in the short-term. This is not an issue with debit cards because the money you spend gets withdrawn instantaneously from your account. Your limit is capped at whatever you have stored in your account, though keeping track of your accounts status should be enough to make you weary of purchasing large items you might want. With credit cards you can keep buying and overspending without keeping tabs, which can have grave consequences when the time to pay the stack of bills comes around. Debit cards are also comparatively painless to acquire. Credit card application typically involves a hard credit check to understand more about your history and whether you are eligible. They also require a certain credit score but with debit cards all you need is a chequing or savings account to attach to the card and you’re all set to bank away.

The cons of a debit card

Though they have their upsides, debit cards come with a set of attributes that aren’t all that great. One of their biggest downsides is that in some circumstances they simply aren’t as safe as credit cards. Fraud protection with debit cards can be somewhat insignificant. The Federal Trade Commission dictates that if you notify your bank within two days of it being stolen, you are liable for up to $50 is charges that are fraudulent. If you miss that window of two days you can be held responsible for up to $500. In the worst case scenario where you only let your bank know after 60 days, you could end up paying all of the fraudulent charges. Banks simply cannot ensure total safety, especially with online retailers. Knowing this, it is suggested to use other payment methods when making purchases online. This can help you stay safer from cyber fraud which is rampant in today’s internet, even if you have antivirus software and a secure network.

Wherever and however you choose to spend your money, know that with debit cards your limit is equal to the funds in your chequing account. That means debit cards are better suited to more manageable purchases as opposed to expensive impulse items whose purchasing depends on whether you have the available funds in your chequing account. It is still an option to exceed your chequing account balance. If you do go over you will be charged overdraft fees. You can stop authorizing your bank to charge you these fees but you may end up having your debit card decline when going over your chequing funds.

Despite their similarities, one of the biggest differences between debit and credit cards is also one of the biggest disadvantages of debit cards. It is credit score and how debit cards have no effect on it. With a credit card you can build your credit score by making all your statement payments in full and on time. Debit cards cannot help you achieve this. Of course, credit cards also put you in danger because if you leave your card unpaid or pay late, you can accrue overwhelming debt and you will end up with bad credit. If you owe a lot on your credit cards with high interest, you can roll it over into your mortgage, by borrowing on your home equity line of credit. This will help you repay your credit card loans faster and in a less costly manner. Credit cards also often have strong rewards programs and perks that allow you to automatically accumulate points from use, or give you cashback. Debit cards don’t have programs like these. There are occasions where banks have their own specific rewards for debit cards but it is rarer.

Knowing all this information, you still might not be completely sure when and how to properly use a debit card. Essentially, debit cards are best to use for anything small and routine. This could be a fair list, including things like groceries or monthly entertainment service fees. This is because all the money is directly withdrawn from your chequing account, so you can monitor it easily, making sure you don’t run out. Overtime, this practice will lead to great established spending habits, making you more confident and comfortable with your money. Avoid the purchases carrying more hefty amounts as they are better suited to credit cards. The downsides are not too many, but you should be aware of them. Problems with fraud and the inability to improve credit score are two of the biggest issues.